On June 27, 2011, the Securities and Exchange Commission (SEC)
extended the compliance date for certain requirements of Rule
15c3-5 (the "market access rule") under the Securities
Exchange Act of 1934. Specifically, the SEC extended the compliance
date until November 30, 2011, for all aspects of the market access
rule for fixed income securities and the requirements of the Rule
15c3-5(c)(1)(i) for all securities. The compliance date remains
July 14, 2011, for all other requirements of Rule 15c3-5.
Rule 15c3-5(c)(1)(i) requires a broker-dealer with market access to
prevent the entry of orders that exceed appropriate pre-set credit
or capital thresholds. While the SEC extended the compliance date
for this aspect of the market access rule, the SEC did not extend
the compliance date for Rule 15c3-5(c)(1)(ii), preventing the entry
of erroneous orders or duplicative orders. Thus, the compliance
date for Rule 15c3-5(c)(1)(ii) remains July 14, 2011.
The SEC's action was in response to requests from the Financial
Information Forum, the Securities Industry and Financial Markets
Association, and the Wholesale Market Brokers' Association. In
making the request for an extension, the industry groups stated
that the types of controls required to prevent the entry of orders
that exceed appropriate pre set credit or capital thresholds were
complex and the industry needed more time to comply. As well, the
type of pre-trade controls required by the market access rule have
generally not been used in the fixed income market. The SEC
provided the limited extension so that broker-dealers have
sufficient time to develop and implement the required risk
management controls for activities where the application of these
controls was not widespread.
Click here to read the SEC's Release No.
34-64748; File No. S7-03-10, "Risk Management Controls for
Brokers or Dealers with Market Access," in its entirety.
Click
here to read Katten's Client Advisory from November 16,
2010, "SEC Adopts New Rule Concerning Risk Management Controls
for Broker-Dealers with Market Access."
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
